Political Science 1050 Sect. 002Final Exam Study GuideChapter #17 : Economic and Social Policy : Three Types of Public Policies:1. Public Policy is a term applied to all government programs and regulations2. Domestic Policy: consists of all government programs and regulations that directly affect those living within a country3. Foreign Policy: involves relations with other nationsStages of Policy Making: Agenda-setting :● Making an issue so visible that important political leaders take it seriouslyTwo Types:1. Systemic Agenda: public outcry, but no government response2. Institutional Agenda: elected officials take it seriously and take legislative actionPolicy Deliberation:● Debate and discussion by groups and political leaders about issues placed on the policy agenda○ Stakeholders: may not agree● Final policy is intended to balance the interests of different groupsPolicy Enactment:● Passage of laws by public officials○ Requires negotiation, bargaining, and compromisePolicy Implementation:● Translation of legislation into set of government programs or regulationsFour kinds of Techniques:1. Authoritative techniques: people’s actions are restrained by government (three felonies sent to permanent sentence)2. Incentive technique: offers financial incentive for compliance (disincentive would be syntax on cigarettes to decrease behavior; more effective)3. Capacity techniques: provide people with appropriate resources (e.g., education, training)4. Hortatory techniques: appealing to people’s better instincts (“Just Say No” campaign; less effective)Policy Outcomes:● Effect of policy outputs on individuals and businesses (or policy evaluation, which is the determination of the effectiveness of a policy)● Evaluated by:○ Congressional Committees○ Presidential Commissions○ Interest groups○ AcademicsJudging the State of the Economy:● Gross Domestic Product (GDP): measure of total economic activity in a nation over the course of a year○ Strongest impact on approval rates in presidential elections○ Exporting more than importing can increase this○ Debt in relation to GDP, if low, less concern● Business Cycle: alternating periods of economic growth and economic slowdowns○ Expansion, recession, and then recovery● Recession: reduction in GDP growth for two quarters (6 months)● Governments try to implement policies that will not disrupt economy:○ Unemployment: typically 4-6%; currently approx. 6.7%○ Inflation: price increases over time on same product; measured through Consumer Price Index, which tracks the costs of essentials over a period of timeHow is Unemployment Calculated?● Total number of citizens currently seeking employment but are without a job / total number of people in the workforce● Government conducts a monthly national survey to calculate unemploymentFiscal Policy:● The sum total of government taxing and spending, which determine whether government revenues exceed expenditures● Budget: government’s annual plan for taxing and spending● Deficit: amount by which annual spending exceeds revenue● Surplus: amount by which annual revenue exceeds spendingTwo Philosophies Over Fiscal Policy:Fiscal Policy and Economic Growth:● Keynesianism: economic policy based on the belief that government spending can be used to jump-start the economy○ F.D.R broke with traditional belief in a balanced budget and ran large deficits during the 1930s to get the economy moving againThree types of spending:● Government, consumer, and business spending (downward spiral; only government left)Using Tax Rates:● Supply-side economics: reduction in tax rate will generate overwhelming economic growth that will produce the same level of government revenue (more money, more spending)● Applied during Reagan administration (reduced tax rates)○ Led to significant budget deficits during the 1980s○ Reagan eventually increased taxes to balance budgetMonetary Policy:● Efforts taken by government to vary the supply of money in the economy to stabilize the business cycle○ If money supply increases too quickly, then you will have inflation○ If money supply decreases too much, there is less money to spend and invest (economy slows down)● Federal Reserve is responsible for controlling money supply● Control interest rates and bank reservesThe Dreaded “T” Word: Taxes:● Taxes are a much debated topic in the United StatesThree important dimensions of tax policy:1. Tax Burden: the total level at which Americans are taxeda. Large tax cuts over last ten years: one reason for increased federal deficit and recent increase in top tax bracketb. How much people typically pay for taxes2. Tax Base: the income (39.6%), property, wealth, or economic activity thatis taxed; some support more broad-based taxes (sales and sin taxes)a. Tax Preferences : special tax treatment received by certain activities, property, or investments3. Tax Structure: structure in which tax rate depends on amount of taxable incomea. Progression Tax : tax structure so that higher-income people pay a larger proportion of their income in taxes than do lower-income people (Buffett Rule - raise taxes on rich)b. Regressive Tax : tax structure so that low-income people pay a larger proportion of their income (sales tax)Tax Reform:● Flat Tax: tax that everyone pays at the same rate○ Pros: simple structure■ Easy to generate more government revenue○ Cons: rich will pay less and poor more than they currently do■ May increase economic inequalityTaxes: International Comparison:● Tax burden in U.S. is much lower than in the world’s other developed countries (among the lowest of the 13 major industrialized countries)● Other countries pay more but provide more services● U.S. relies more on income and payroll taxes● Other countries rely more heavily on consumption taxesNational Debt:● Currently, the national debt is at almost 17 trillion dollars (approx. 73% of GDP)○ Accumulated deficits over several years whereas deficit is only one year● Our debt considered moderate compared to other advanced nations (Japan and Italy have proportional debts that are more than twice as large)○ Economic slowdown or spending (stimulus package) at around 2008Social Insurance for Senior Citizens:● 1935 Congress enacted the landmark Social Security Act● Social security is a social insurance program for seniors and the disabled○ If born before 1937, get full benefits